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Reuters reported on July 23, 2026, that Alphabet burned $5.9 billion in the second quarter even as its cloud unit renting AI computing power achieved record 82 percent growth. With the company now expected to spend an additional $15 billion in 2026 and forecast further increases the following year, outlays tied to the cash burn are projected to climb higher. The development has jolted investors ahead of results from Microsoft, Meta Platforms and Amazon next week, according to the wire service, as soaring expenditures strain one of the world’s most profitable technology groups. Once valued for generous margins and abundant cash that funded new ventures, these firms now rely on debt and share sales to support investments that will exceed $700 billion this year while cash flows lag.[[1]](https://www.gulf-times.com/article/729800/business/alphabets-cash-burn-raises-alarm-for-big-tech-as-ai-spending-climbs)
The resulting share price moves saw Alphabet fall about 6 percent in early trading on Thursday, with Meta and Amazon declining around 3.5 percent while Microsoft stayed flat, Reuters data showed. This reaction reflects broader worries that peers will also lift spending projections even as returns trail the pace of outlays. Analysts anticipate Alphabet and Amazon will burn cash through 2026, Meta’s cash flow will shrink 95.7 percent to $1.85 billion and Microsoft’s will drop to $25.39 billion from $58.74 billion the prior year.
A Reuters analysis of LSEG consensus estimates indicates the five hyperscalers could outspend cash flow by 2027, generating about $340 billion more in annual operating cash flow than in 2025 while capex rises roughly $534 billion.[[2]](https://www.reuters.com/business/ai-investment-boom-puts-big-techs-free-cash-flow-under-pressure-2026-07-22/) Bloomberg reported earlier that four leading firms had forecast around $650 billion in combined capital expenditures for 2026, a figure later revised higher toward $725 billion at some points in the year.[[3]](https://www.bloomberg.com/news/articles/2026-02-06/how-much-is-big-tech-spending-on-ai-computing-a-staggering-650-billion-in-2026)[[4]](https://www.bloomberg.com/news/articles/2026-04-30/us-big-tech-ratchets-up-ai-spending-past-700-billion-this-year) Macrotrends figures show Alphabet produced $73.3 billion in annual free cash flow for 2025, marking a modest rise from 2024 levels before the latest acceleration in AI infrastructure costs altered the trajectory.[[5]](https://www.macrotrends.net/stocks/charts/GOOGL/alphabet/free-cash-flow) Their capex-to-revenue ratios are forecast to nearly double, reaching 54.9 percent for Meta from 35.9 percent, 41 percent for Alphabet from 23 percent, 45 percent for Microsoft from 31 percent and 25 percent for Amazon from 18 percent.
“The risk is tilted towards further increases, particularly while Microsoft and others remain capacity-constrained,” Charu Chanana, chief investment strategist at Saxo Markets, said. “But investors will increasingly focus on how much of that cash must be reinvested simply to remain competitive — and whether AI revenue can grow faster than capital expenditure, depreciation and operating costs.” Strong Google Cloud results have intensified pressure on Amazon and Microsoft by expanding faster than rivals in recent quarters, a development that may indicate market share gains for Alphabet. Demand proved robust enough that executives outlined plans to lease additional data-center capacity from third parties despite the negative effect on margins.
At least 20 brokerages lifted price targets on Alphabet following the results, raising the median to $430, which sits nearly 26 percent above the prior close, with Citizens most optimistic at $515 and TD Cowen most cautious at $240. “Google Cloud was an absolute blow out,” said Richard Clode, portfolio manager of Janus Henderson Investors’ Global Technology Leaders. “Alphabet has competitive advantage running all the way through the stack from their own custom AI chips through to distribution to billions of users.”
Amazon Web Services growth is projected at 31.04 percent for the quarter, accelerating from 28.4 percent previously, while Microsoft is expected to hold near 39.98 percent after 40 percent in the preceding period, according to consensus estimates. Those figures could add pressure on Microsoft shares, which have fallen nearly a fifth this year and rank as the weakest performer among the Magnificent Seven group. “As compute becomes more available and models become cheaper, cloud capacity may look increasingly interchangeable,” Lale Akoner, global market strategist at eToro, said. “That could force providers to spend more while accepting lower returns.”
